Abstract: Standard theoretical model cannot generate positive and large real bond risk premium under power utility preferences. Following recent developments in equity premium literature we explore bond premium in a long run risk environment with generalized isoleastic preferences. This approach...

Real interest rates, long run risks and business cycles. Standard theoretical model under power utility preferences generates time series for real yields and output that are not consistent with the cyclical properties of the macroeconomic data. In particular real interest rates of the model are...

Existing theories of the term structure of swap rates provide an analysis of the Treasury-swap spread based on either a liquidity convenience yield in the Treasury market, or default risk in the swap market. While these models do not focus on the relation between corporate yields and swap rates...

This paper defines the value of a general claim based on agent's preferences and coherent with the No Arbitrage Principle. This Value is a non trivial extension of the certainty equivalent since it takes into consideration the possibility of partially hedging the risk carried by the claim. When...

This Paper solves explicitly a simple equilibrium asset pricing model with liquidity risk – the risk arising from unpredictable changes in liquidity over time. In our liquidity-adjusted capital asset pricing model, a security’s required return depends on its expected liquidity as well as on...

We propose a theory of asset pricing based on heterogeneous agents who continually adapt their expectations to the market that these expectations aggregatively create. And we explore the implications of this theory computationally using our Santa Fe artificial stock market.

This paper investigates the dynamics in the simple present discounted value asset pricing model with heterogeneous beliefs.

I analyze a static, noisy rational expectations equilibrium model where traders exchange vectors of assets accessing multi-dimensional information under two alternative market structures. In the first (the unrestricted system), informed speculators condition their demands for each asset on all...

This paper shows that information effects per se are not responsible for the Gi®en goods anomaly affecting competitive traders' demands in multi-asset, noisy rational expectations equilibrium models. The role that information plays in traders' strategies also matters. In a market with risk...

This paper investigates the risk-return relationship in determination of housing asset pricing. In so doing, the paper evaluates behavioral hypotheses advanced by Case and Shiller (1988, 2002, 2009) in studies of boom and post-boom housing markets. The paper specifies and tests a housing asset...